New cars are piling up on dealers' lots across the nation. But the glut may be more of a blessing than a curse for America's two biggest auto makers, General Motors Corp. and Ford Motor Co.
Both companies begin labor negotiations next month with the United Auto Workers union, which feels it has gained little from the record sales the manufacturers enjoyed from 1983 through 1986.
With the union seeking more money and job security and with GM and Ford still working to cut costs and improve their competitive postures, a strike is possible in September when the current UAW labor agreements expire.
For that reason, according to some auto industry analysts, GM and Ford are not as concerned as they might be about their bulging new-car inventories. The big stockpiles could serve as insurance in the event that production is interrupted by a work stoppage.
Ford and GM have in fact scaled back their sales-incentive programs, but many auto industry analysts believe the two companies will beef them up again quickly if the threat of a strike recedes.
A 55-to-60-day supply of cars -- a combination of those en route to dealers and on dealers' lots -- is regarded as "normal" in the U.S. auto industry. But according to figures compiled by Automotive News, a Detroit-based auto trade journal, GM had an 87-day supply of cars on June 1, compared with a 63-day supply that day last year.
Ford had a 71-day supply of cars at the beginning of June, compared with a 55-day supply last year.
Traditional domestic auto makers -- GM, Ford and Chrysler Corp., which is acquiring American Motors Corp. -- have a total of 23 car lines with more than 100-days' supply. Sixteen of those lines are in GM's fleet, according to Thomas O'Grady, president of Integrated Automotive Resources, an auto-market research and consulting firm based in Wayne, Pa.
Normally, oversupply is a blessing for consumers. And, indeed, many auto industry analysts contend that the current new-car sales climate favors a buyers' market. But difficulties in labor negotiations could change that picture, analysts say.
"You're not going to be able to get many deals during a strike," said Harvey E. Heinbach, an auto industry analyst and vice president at Merrill Lynch, Pierce, Fenner & Smith Inc. in New York. "A dealer isn't going to be willing to get rid of a car easily, if he doesn't know where his next car is coming from."
But that development could be bad for dealers, too, Heinbach said. Consumers have become so wedded to cut-rate financing and rebates, they are not likely to visit showrooms during a period when dealers are reluctant to deal, he said.
For now, GM's and Ford's dealers, as well as Chrysler's and many selling Japanese and German cars, are hustling after buyers.
"There's quite a bit of a glut in the market, and it's an across-the-board glut affecting imports and domestics," O'Grady said.
Honda Motor Co. Ltd. appears to be the exception, with an estimated 11-day supply of cars -- a supply-picture that seemed to characterize most Japanese new-car fleets in better times. But for most Japanese auto makers, "The days of the 11-day and 12-day supplies are over. Now, they're getting up to 40 days, and some are as high as 100 days," O'Grady said.
"I think we're still paying for an awful lot of cars we sold last year" because of super-low new-car financing and buyers rushing to qualify for sales tax deductions before federal tax law changes elminated those provisions, said David Healy, an analyst with Drexel Burnham Lambert Inc. in New York.
Last year's buyers' rush to beat federal tax law changes pulled hundreds of thousands of customers out of the 1987 auto market, Healy said. That phenomenon, coupled with cut-rate financing and rebates, meant that "a lot of people who were just thinking about buying cars last year went out and bought them," Healy said.
Also, sales incentives seem to have lost some of their pulling power, Healy said. Buyers are becoming jaded, and are more inclined to wait for the "best" incentive program to come along before they make their move, Healy said.
O'Grady agreed that the sales lures have lost some of their luster. But he said the fault lies with manufacturer and dealer advertising, which tend to confuse buyers about what incentives are really available.
Auto makers last year sold a record 16.3 million cars and trucks in the United States, but probably will sell 15.1 million vehicles in America in 1987, Healy and other analysts said. A slight increase in truck sales, from about 4.8 million trucks in 1986 to about 4.9 million this year, will help to support 1987-vehicle sales, Healy said.
L. Raymond Windecker, chief auto industry analyst for Ford Motor Co., agreed with Healy's assessment. "We said at the beginning of the year that overall car and truck sales were going to be down about 7 percent, and that's what the market is doing," Windecker said.
Dealers, too, while admitting that this year's sales are off-par, expressed optimism that 1987 will finish as a reasonably good sales year.
"We have 225 cars in inventory, which is about average for us," said Al Glick, sales manager at Thomassen Lincloln-Mercury Inc. in Rockville. "Several months ago, we had a heavy inventory of about 275 to 300 cars, but that's because manufacturers just kept building them and shipping them," Glick said.
Sales incentives and production cutbacks helped reduce some of his company's new-car stockpile.